Our Commercial Property Team, looks at repairing liabilities in leases.
Most modern day leases will usually require a tenant to keep the property let to it clean and tidy and in good repair and condition. When taking the lease, the tenant should consider the extent of repair imposed on them and the standard of repair required of them.
The extent of the repairing liability is determined by who owns what under the lease, so:
- If the whole of the building is being demised to the tenant, then more often and not, the tenant will be required to take on the responsibility for repairing the whole of the building – the foundations, the walls and the roof (as well as anything inside it).
- Where the lease being taken forms part of a building (a shop unit or an office suite for example) a lease will normally be drafted so that the landlord will maintain the structure and common parts of the building. The tenant will usually be responsible for repairing the internal features of the area demised – the plaster finishes on the walls, internal non-supporting columns, ceiling and floor structures up to a half way point being some of the more usual defining references. The landlord will look to seek recovery of its costs of maintaining its designated areas from the tenant through service charge.
The actual extent will sometimes be determined by the age and type of the building or by what sits beneath it. Examples that might limit the extent of a tenant’s repairing liability could include:
- Is the building listed? If it is, then the landlord might want to retain control to ensure compliance with planning legislation.
- Is the land that the building sits on contaminated? If it is, then the tenant might want to try and agree that what is known as a pie crust lease is taken. The extent of the repairing liability is only for the surface of the land and for nothing below it.
- Is the property a new build? If it is, will it have the benefit of warranties? If it does, then a tenant might want to limit its obligation to repair so that any damage to the property which is covered by those warranties is excluded from its liability.
The exact extent of what each party will be responsible to repair is important to consider at the outset of lease negotiations, as it can lead to a significant cost liability during and at the end of the lease term. A survey may be a useful tool in determining this.
Linked in with the extent of the repairing liability is the actual level of repair that will need to be made during and at the end of the lease term. This often causes much debate, the older the property or the more complex the property is in the nature of its build. Modern day leases tend to contain an obligation ‘to keep the Property in good, substantial and proper repair and condition’. The Courts have determined that this standard based on the age and character of a property. For example the standard for a Grade A office space and an industrial warehouse will be vastly different as the style and materials used for each individual property will need to be taken into consideration. With this wording it is probably worth taking the view that whatever the condition of the property at the date the lease is taken, this wording will mean that you have to leave it repaired to a very high standard, perhaps better than when the lease is taken.
If the property is older or has had works done to it over time, then having the above obligation imposed on you, as a tenant, can seem unfair. It might be that the landlord and the tenant will agree to attach a schedule of condition to the lease being taken – a series of photographs that document what the property looks like. This means that during and at the end of the lease term, the tenant need only do what is needed to give the property back in the condition shown by the schedule.
When drafting the lease, we will work with you and your surveyor to document the best options for you in terms of liability to repair and, if the landlord, how you might recover the costs of any works that you do from the tenant.
If you have any questions or would like to discuss any of the issues raised in this blog, please feel free to contact our Commercial Property team.